The Central Board of Direct Taxes (CBDT) has unveiled the Draft Income-tax Rules, 2026, which are set to replace the Income-tax Rules, 1962 which will impact your salary, property deals, banking, and investments from 1 April 2026.
The draft rules are open for stakeholder comments until February 22 and are expected to come into effect from April 1, 2026, alongside the new Income-tax Act, 2025. The objective is clear: simplify compliance, modernise reporting systems, plug tax leakages, and align financial thresholds with today’s economic realities.
There are several practical changes that could directly influence how individuals handle their salary structuring, insurance payments, property transactions, vehicle purchases, and even cryptocurrency investments.
Here’s a detailed look at the 10 most significant proposed changes:
1. PAN Requirements Completely Reworked for High-Value Transactions
The draft rules significantly restructure when quoting Permanent Account Number (PAN) becomes mandatory.
Key changes:
- Annual Cash Transactions: PAN will be required if aggregate cash deposits or withdrawals exceed ₹10 lakh in a financial year.
- Vehicle Purchases: PAN will be mandatory for motor vehicle purchases worth ₹5 lakh or more, including two-wheelers.
- Immovable Property Deals: PAN must be quoted for property transactions exceeding ₹20 lakh. This includes gifts, Joint Development Agreements (JDAs), and stamp duty value-based transactions.
- Insurance Premiums: PAN will be required for all insurance premium payments, irrespective of the amount.
- Hotels & Events: PAN must be furnished for payments exceeding ₹1 lakh per transaction (earlier ₹50,000).
The shift moves away from fragmented transaction-based triggers to a more structured annualised monitoring framework.
2. Cash Deposit & Withdrawal Reporting Shifted to Annual Threshold
Currently, PAN is required for cash deposits exceeding ₹50,000 in a single day. Withdrawals did not have a clearly defined equivalent trigger.
Under the draft rules:
- The focus moves to an annual aggregate threshold of ₹10 lakh for both deposits and withdrawals.
This change reduces procedural burden for smaller daily transactions but strengthens monitoring of large cash-intensive financial activity over the year.
3. HRA Relief Extended to More Metro Cities
In a significant development for salaried taxpayers, Bengaluru, Pune, Ahmedabad and Hyderabad are proposed to be classified as metro cities for House Rent Allowance (HRA) purposes.
Currently, only Mumbai, Delhi, Kolkata and Chennai qualify for 50% of basic salary (plus DA) exemption cap and Other cities are capped at 40%.
If implemented, professionals residing in these newly added cities could see enhanced HRA exemptions and lower tax outgo.
4. Higher Tax-Free Limits for Employer Perquisites
The draft rules revise and consolidate tax-free limits on employer-provided benefits such as:
- Official vehicles
- Employer-sponsored meals
- Certain business-related reimbursements
Many existing provisions were outdated and scattered across multiple rules. The proposed rationalisation aims to reflect present-day costs and streamline salary structuring compliance.
5. Property Transaction Reporting Threshold Increased
The reporting threshold for quoting PAN in immovable property transactions has been raised from ₹10 lakh to ₹20 lakh.
Importantly, the revised scope now explicitly covers:
- Gift transactions
- Joint Development Agreements (JDAs)
- Stamp duty value-based transactions
This adjustment aligns regulatory triggers more realistically with current property valuations in urban and semi-urban markets.
6. PAN Mandatory for All Insurance Premium Payments
Earlier, PAN was required only when annual insurance premium payments exceeded ₹50,000.
Under the new draft:
- PAN becomes compulsory for all insurance premium payments, regardless of value.
This move may enhance traceability, particularly for high-value policies structured through multiple smaller payments.
7. Two-Wheelers Now Brought Under PAN Norms
Previously, PAN was required for purchase of all motor vehicles except two-wheelers, irrespective of price.
The draft introduces a value-based approach:
- PAN required for vehicle purchases of ₹5 lakh or more, including motorcycles and premium two-wheelers.
Given rising vehicle prices, especially in the premium segment, this change modernises the compliance framework.
8. Expanded Reporting Norms for Crypto Exchanges
Recognising the growing digital asset market, the draft rules impose broader information reporting obligations on cryptocurrency exchanges.
This is expected to:
- Improve traceability of virtual digital asset (VDA) trades
- Strengthen anti-tax evasion enforcement
- Align crypto reporting with international transparency standards
Investors in digital assets may see tighter compliance and disclosure requirements.
9. CBDC Recognised as Valid Electronic Payment Mode
The draft rules formally recognise Central Bank Digital Currency (CBDC), or the Digital Rupee, as an approved electronic mode of payment.
With the Reserve Bank of India already piloting CBDC, this formal inclusion integrates digital currency into the mainstream tax compliance framework.
This step signals India’s intent to gradually embed sovereign digital currency within formal financial reporting systems.
10. Structural Simplification: Massive Reduction in Rules & Forms
One of the most far-reaching reforms is structural simplification.
Under the draft framework:
- Total Rules reduced from 511 to 333
- Prescribed Forms reduced from 399 to 190
This rationalisation aims to eliminate redundancies, consolidate provisions, and make compliance more navigable for taxpayers, professionals and administrators.
